Top Beneficiaries Of The Federal Reserve

I asked ChatGPT who benefits from the Federal Reserve. My exact question and ChatGPT’s complete response are below. The response has not been altered and is entirely attributable to ChatGPT, including bold type and quotation marks. My comments and conclusion are at the end of the article…

Kelsey’s Gold Facts: Who – specifically – benefits from the existence and operation of the Federal Reserve?

ChatGPT: The existence and operation of the Federal Reserve benefits a wide range of entities—some directly, others indirectly. But when we ask “who benefits most” or “who benefits specifically,” we’re typically talking about:

Top Beneficiaries of the Federal Reserve System

1. Large Commercial Banks (Especially Primary Dealers)

These include:

• • JPMorgan Chase

  • Bank of America

  • Citigroup

  • Goldman Sachs

  • Morgan Stanley

  • Barclays, BNP Paribas, etc.

Why they benefit:

• • Direct access to liquidity: Can borrow cheaply from the Fed’s discount window or repo operations.

  • Influence over monetary policy transmission: As primary dealers, they execute Fed open market operations and often get early insight into policy sentiment.

  • Backstops during crises: Received bailouts, special lending programs (like during 2008 & 2020).

  • Asset price inflation: Low rates and QE support higher bond and stock prices, which boosts bank assets and profits.

 Example: In 2020, the Fed’s emergency lending and bond-buying programs disproportionately aided large banks’ balance sheets and market holdings.

2. The U.S. Treasury and Federal Government

Why they benefit:

• • Lower borrowing costs: Fed purchases of Treasury bonds (QE) reduce yields and interest payments.

  • Monetary–fiscal coordination: While technically independent, Fed policies like low rates and QE help finance large deficits more cheaply.

  • Remittances: The Fed returns excess profits (minus expenses) to the Treasury—over $100 billion in some years.

3. Wall Street & Asset Managers

• • BlackRock, Vanguard, Fidelity, Bridgewater, Citadel, etc.

Why they benefit:

• • Asset inflation: Fed-driven low interest rates push capital into risk assets, boosting equity, bond, and real estate markets.

  • Monetary policy front-running: Large firms often interpret and trade on Fed policy shifts faster than the public.

  • Contractual relationships: In 2020, BlackRock was contracted to run parts of the Fed’s corporate bond-buying program.

4. Investors & Speculators

• • Hedge funds, pension funds, and private equity.

Why they benefit:

• • Predictable Fed policy (forward guidance) reduces market volatility.

  • QE and interest rate suppression inflates asset values.

  • Moral hazard: Speculators feel confident the Fed will step in during downturns (“Fed Put”).

5. Member Banks of the Federal Reserve System

Over 2,000 U.S. banks own stock in their regional Federal Reserve Bank.

Why they benefit:

• • Annual dividends (6% or market-based) paid on required capital stock.

  • Regulatory access & influence: Participation in Fed advisory committees.

  • Support services: Payments systems, bank supervision, research.

 Important: These “shares” in the Fed are not publicly traded and do not confer ownership or control in the corporate sense—but member banks still benefit financially and operationally.

6. Corporate America (Indirectly)

• • Lower interest rates = cheaper business borrowing.

  • Stimulated consumer demand via credit and employment.

  • Rising asset prices improve corporate valuations and shareholder wealth.

7. U.S. Dollar Holders & Global Institutions (Mixed Impact)

• • Foreign central banks, IMF, global corporations.

Why they benefit:

• • The Fed’s stability policies protect the dollar’s reserve status.

  • In times of global crisis, the Fed provides dollar swap lines to foreign central banks—sustaining global trade and investment flows.

Who Benefits the Least (or Bears the Costs)?

• • Savers: Near-zero interest rates erode real returns on savings.

  • Lower-income individuals: Asset inflation primarily benefits the wealthy who own stocks and real estate.

  • Small banks and credit unions: Have less access and influence compared to megabanks.

  • The broader public: Often experiences delayed wage growth and long-term inflation impacts.

Summary

Those who benefit most directly and consistently from the Federal Reserve’s operation are:

• • Large commercial and investment banks (especially primary dealers)

  • The U.S. government (via debt financing and remittances)

  • Wall Street firms and large asset managers

  • Major corporate borrowers and institutional investors

These entities operate closest to the Fed’s monetary and financial plumbing—where influence, access, and monetary flows are strongest.

MY COMMENTS AND CONCLUSION

Who benefits the most…

It should not be surprising that the top beneficiaries of the Federal Reserve System are 1) large commercial banks (primary dealers) and 2) the U.S. Treasury and the federal government.

The Federal Reserve exists for the benefit of the banks and bankers. Its purpose and motivation are not aligned with public expectations. The Fed’s objective is to facilitate the ongoing creation of money and loans (no-reserve banking), which generates interest income. Banks create money, lend it, and collect interest – all in perpetuity. (see Federal Reserve – Purpose And Motivation).

In order to swing the needed votes in Congress to pass the legislation which authorized creation of the Federal Reserve in 1913, some additional pressure was brought to bear by the executive branch and some key players in government. In exchange for that support and special influence, the Federal Reserve affiliated parties promised that the government, i.e., U.S. Treasury, would never run out of money. Hence, existing Treasury debt gets rolled over continuously and the size of the debt continues to grow…

“The Federal Reserve provided a convenient ‘funnel’ for US Treasury securities in the form of bills, notes, and bonds. These securities are a form of debt that is “monetized” on issuance and become a source of collateral and funding for trillions of dollars worth of economic activity.

Today, US Treasury securities are issued and sold at auction. A portion are sold via the program Treasury Direct, but most are placed with certain primary dealers. Any unsold securities are required to be kept and held by the primary dealers.

The Federal Reserve also holds Treasury securities on its own balance sheet. Between the Fed and its primary dealers, plus any Treasuries sold to the investing public, the US Treasury receives an amount of money equivalent to the dollar amount of securities it has issued. This is true always – every time; regardless of any undersubscriptions.

In other words, the Federal Reserve underwrites and guarantees that the U.S. Treasury/Government will get whatever funds it needs. And that was the promise made over one hundred years ago.” (U.S. Government Is Beholden To The Fed )

Close behind in the heirarchy of Federal Reserve beneficiaries are Wall Street firms, money managers, investors and speculators.

There are some additional beneficiaries listed which might raise some eyebrows. Personally, I would question the claim that U.S. dollar holders are a beneficiary of the Federal Reserve.

The Federal Reserve and the banks create inflation by continually expanding the supply of money and credit. Intentional inflation by the Federal Reserve System has destroyed the U.S. dollar, which has lost more than 99% of its purchasing power since the Fed’s inception in 1913.

Who benefits the least (or bears the costs)…

I did not ask for this information, but ChatGPT gave it to me anyway, and it is an eye-opener.

The Fed doesn’t care about smaller banks and credit unions. That lack of concern dates back to the Fed’s inception. Smaller banks are at the bottom of the list in size and influence, regardless of remarks made by former Treasury Secretary Yellen. It is all about size and influence, not fairness.

Bringing up the rear for benefits from the Federal Reserve is “the broader public”. Actually, the broader public is not a beneficiary – at all – of the Federal Reserve. As a result of the U.S. dollar’s loss of purchasing power, coupled with painfully slow wage growth, the broader public “Bears the Costs” for the Fed’s fun and games.

All of this contrasts markedly with public perception of the Federal Reserve and its role as stated by Fed Chair Powell earlier this year..,

“The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals, and, really, keeping our heads down and doing our work,” he added. “That is how we best serve the public.”  Federal Reserve Chair Jerome Powell, January 2025

The Federal Reserve does not exist “to serve the public”. The Federal Reserve is a banker’s bank and exists for the benefit of the banks and bankers who create, control, and lend money in perpetuity.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

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